Dear Liz: I am trying to purchase my first home. I have a 20% down payment for the price range that I am looking for. The issue I am running into is that I have relatively new credit and my credit score is not great at all. I had to go to the emergency room two years back with no insurance and have medical expenses that went into collections. I am now in a financial spot to pay them off. These are the only negatives on my credit report that are unresolved. Will paying these off get my credit to the point that I can buy a home? I am lost as to how to get my score where it needs to be.
This excerpt from latimes.com. To read more please click the link below.
Call today for more information and help with first time home buyer credits!
Stacy Schnell / Realtor Associate
What Is A Credit Score?
When lenders evaluate a loan application, a process called underwriting, they try to evaluate your ability and willingness to repay the loan. They judge the borrower’s ability to repay by reviewing the income and stability of past earnings. This practice helps the lender to determine if the borrower can afford the loan payments. The review of past credit history is used to judge the willingness of the borrower to repay the loan.
Lenders want their evaluation to be as accurate, objective and consistent as possible. To help achieve this goal, home mortgage lenders use credit scores to assist in the underwriting process. Credit scores are numerical values that rank individuals according to their credit history at a given point in time. A credit score is based on past payment history, the amount of available credit, and other factors. According to Fannie Mae and Freddie Mac, two large investors in mortgage loans, credit scores have proven to be very good predictors of whether a borrower will repay his or her loan.
Credit scores are just one of many factors considered in the underwriting process. The lender will review the many components that make up the financial situation of a borrower. Even when a credit score is low, there are other factors that could overcome the negative credit issues and satisfy other underwriting criteria.
Click HERE to read more. As always, please feel free to call me anytime with your real
estate questions and needs.
Stacy Schnell – Realtor Associate – Cell : 856-364-0772
Though you may be willing to spend a certain amount, the real determination of how much house you can afford is driven by how much a lender calculates you can afford. So before you begin to search for the perfect house, it is very important to begin the homebuying process by getting preapproved. Getting preapproved for a home mortgage loan will provide you with a preliminary statement on the size of loan for which you can qualify. Knowing this, you can then focus your home search.
In general, lenders allow your total monthly housing costs to go as high as but not more than 30 percent of your gross monthly income. The second requirement is that not more than 36 percent of your gross monthly income can be tied up in the total monthly house payment and payments on long-term debt.
Visit my Website to read more and for adiitional information about obtaining a mortgage. Please feel free to give a call anytime for assistance with the home buying process!
Stacy Schnell – Realtor Associate – Cell: 856-364-0772